PETROSAUDI International (PSI) never paid some US$2.2 billion (RM6.6 billion) which was owed to its joint venture partner 1Malaysia Development Bhd, Najib Razak’s criminal trial heard today.

Former 1MDB CEO Shahrol Azral Ibrahim Halmi told the Kuala Lumpur High Court that PSI’s debt to 1MDB was around US$2.2 billion as of 2015.

The debt was the combined result of a failed 2009 joint venture, Murabaha financing and loans, said the witness when cross-examined by lead defence counsel Muhammad Shafee Abdullah today.

Apart from making one interest payment of RM129 million, PSI never made subsequent obligatory payments to 1MDB, the witness said.

In a joint venture with PSI in 2009, 1MDB had injected US$1 billion for a 40% stake in the joint venture company.

Five days after the joint venture deal was signed on September 25, 2009, US$300 million was paid to PetroSaudi Holdings (Cayman) Ltd and US$700 million to Good Star Ltd.

Both were later revealed by investigators to be sham companies, with Good Star controlled by fugitive businessman Low Taek Jho, commonly known as Jho Low.

Prosecutors have accused Najib of conspiring with the Penang-born Low to defraud the state investor.

Shahrol testified that the 1MDB board later decided to put up US$500 million for a Murabaha financing agreement with PSI, which was to give 1MDB a return of 8.25% per annum.

The witness verified that on September 14, 2010, 1MDB issued an instruction to AmBank to transfer the amount to 1MDB-PetroSaudi Ltd’s bank account, held by JP Morgan Swiss SA.

The joint venture company was controlled by PSI, then led by CEO Tarek Obaid, who prosecutors said had conspired with Low.

Shahrol also verified that in May 2011, a further sum of US$330 million, which was supposed to be the second tranche of the investment into the Murabaha financing, was instead diverted to Good Star Ltd.

Shahrol said the board in July 2010 had chosen the Murabaha financing that over a previous plan to invest US$1 billion into a joint venture for a 4.23% stake in French energy firm GDF Suez due to perceived higher risk and the lack of due diligence carried out on PSI and the joint venture company.

The board, led by 1MDB chairman Lodin Wok Kamaruddin, abandoned the plan as the GDF Suez investment did not appear to be able to provide immediate returns.

Najib Razak, 66, is on trial for four counts of power abuse to enrich himself with RM2.3 billion from 1MDB and 21 counts of laundering the same amount.

Former Federal Court judge Gopal Sri Ram leads the prosecution before judge Collin Lawrence Sequerah.

The trial continues. – November 5, 2019.